[Q2 2025 Earnings Release Overview](index=1&type=section&id=Seaport%20Entertainment%20Group%20Reports%20Second%20Quarter%202025%20Results) This section provides an overview of Seaport Entertainment Group's second quarter 2025 earnings release [CEO Statement](index=1&type=section&id=CEO%20Statement) CEO Anton Nikodemus expressed optimism about the company's Q2 year-over-year gains and anticipated continued Q3 momentum - The company has made **tremendous progress** in its first year as a standalone public company, establishing a strong foundation for future growth[2](index=2&type=chunk) - Positive Q3 outlook is fueled by the Seaport Concert Series, diversified hospitality offerings, real estate strategy, and the Las Vegas Aviators' potential playoff run[2](index=2&type=chunk) [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) This section details the company's key financial and operational achievements for the quarter and year-to-date [Second Quarter 2025 Highlights](index=1&type=section&id=Select%20Second%20Quarter%202025%20Results) In Q2 2025, the company reported a **net loss of $14.8 million** while advancing strategic real estate and partnership initiatives Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Loss | ($14.8) million | | Net Loss per Share | ($1.16) | | Non-GAAP Adjusted Net Loss | ($7.4) million | | Non-GAAP Adjusted Net Loss per Share | ($0.58) | - The company is exploring strategic alternatives for its **250 Water Street development site**[5](index=5&type=chunk) - Completed a corporate restructuring with Jean-Georges Restaurants, converting management agreements for the Tin Building and The Fulton into new license agreements[5](index=5&type=chunk) - Nike exercised an early termination right for its Pier 17 office space, with half the termination payment received in Q2 2025 and the remainder due in 2027[5](index=5&type=chunk) - The company **uplisted to the NYSE** and was added to the Russell 2000 and Russell Microcap Indexes[5](index=5&type=chunk) [Year-to-Date 2025 Highlights](index=1&type=section&id=Select%20Year-to-Date%202025%20Results) For H1 2025, the company reported a **net loss of $46.7 million** while internalizing F&B operations and expanding leased space H1 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Loss | ($46.7) million | | Net Loss per Share | ($3.68) | | Non-GAAP Adjusted Net Loss | ($30.2) million | | Non-GAAP Adjusted Net Loss per Share | ($2.38) | - Internalized food and beverage operations at most Seaport restaurants by hiring employees from **Creative Culinary Management Company LLC (CCMC)**[10](index=10&type=chunk) - Leased, programmed, or established development plans for approximately **98,900 square feet** of space within the Seaport neighborhood, including new leases and planned event space[10](index=10&type=chunk) - Announced the Seaport neighborhood as the host location for the **New York City Wine & Food Festival** in October 2025[10](index=10&type=chunk) [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) This section analyzes the company's financial performance for Q2 and H1 2025 compared to prior periods, along with balance sheet highlights [Quarterly Results (Q2 2025 vs Q2 2024)](index=2&type=section&id=Quarterly%20Results) Q2 2025 total revenues increased by **18.2% to $39.8 million**, with net loss significantly narrowing to **($14.8) million** Q2 2025 vs Q2 2024 Financial Performance | Metric ($ in thousands, except per share) | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $39,801 | $33,670 | $6,131 | 18.2% | | Net Loss Attributable to Common Stockholders | ($14,774) | ($34,997) | $20,223 | 57.8% | | Net Loss Per Share | ($1.16) | ($6.34) | $5.17 | 81.6% | | Non-GAAP Adjusted Net Loss | ($7,415) | ($28,384) | $20,969 | 73.9% | - The year-over-year revenue comparison was impacted by the consolidation of the **Tin Building by Jean-Georges** as of January 1, 2025, which was previously accounted for under the equity method[7](index=7&type=chunk) [Year-to-Date Results (H1 2025 vs H1 2024)](index=2&type=section&id=Year-to-Date%20Results) H1 2025 total revenues grew **16.0% to $55.9 million**, with net loss improving by **41.0% to ($46.7) million** H1 2025 vs H1 2024 Financial Performance | Metric ($ in thousands, except per share) | H1 2025 | H1 2024 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $55,870 | $48,181 | $7,689 | 16.0% | | Net Loss Attributable to Common Stockholders | ($46,662) | ($79,075) | $32,413 | 41.0% | | Net Loss Per Share | ($3.68) | ($14.32) | $10.64 | 74.3% | | Non-GAAP Adjusted Net Loss | ($30,173) | ($63,028) | $32,855 | 52.1% | [Balance Sheet Summary (as of June 30, 2025)](index=4&type=section&id=Balance%20Sheet) As of June 30, 2025, the company held **$125.4 million in cash** with **$101.4 million in total consolidated debt** and no significant maturities until Q3 2029 - The company had **$125.4 million** in cash, cash equivalents and restricted cash[12](index=12&type=chunk) - Total consolidated debt was **$101.4 million**, with a weighted-average maturity of approximately **7.7 years** and no meaningful maturities until **Q3 2029**[12](index=12&type=chunk) - The debt structure consists of **40% fixed-rate debt** at a **4.9% weighted-average interest rate** and **60% floating-rate debt** at an effective rate of **8.8% after a total return swap**[12](index=12&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents the company's consolidated financial statements, including balance sheets and statements of operations [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity as of June 30, 2025, showing a decrease in total assets and an increase in total liabilities Consolidated Balance Sheets | Balance Sheet Item ($ in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$717,226** | **$743,556** | | Cash and cash equivalents | $123,276 | $165,667 | | Net investment in real estate | $480,055 | $463,141 | | **Total Liabilities** | **$189,421** | **$172,174** | | Mortgages payable, net | $100,632 | $101,593 | | **Total Equity** | **$527,805** | **$571,382** | [Consolidated and Combined Statements of Operations](index=8&type=section&id=Consolidated%20and%20Combined%20Statements%20of%20Operations) This statement details the company's revenues and expenses for Q2 and H1, with entertainment and hospitality as primary revenue sources Revenue Breakdown | Revenue Breakdown ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Hospitality revenue | $15,177 | $9,053 | | Entertainment revenue | $19,908 | $17,153 | | Rental revenue | $4,232 | $6,814 | | **Total revenues** | **$39,801** | **$33,670** | Expense Breakdown | Expense Breakdown ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Hospitality costs | $17,845 | $9,693 | | Entertainment costs | $15,281 | $14,925 | | Operating costs | $7,684 | $10,375 | | General and administrative | $8,291 | $18,613 | | **Total expenses** | **$55,682** | **$58,939** | [Reconciliation of Net Loss to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Non-GAAP%20Adjusted%20Net%20Loss) This section reconciles GAAP Net Loss to Non-GAAP Adjusted Net Loss, adjusting for non-cash items like depreciation and non-cash compensation Reconciliation of Net Loss to Non-GAAP Adjusted Net Loss | Reconciliation ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss attributable to common stockholders | ($14,774) | ($34,997) | | Depreciation and amortization | $7,603 | $6,397 | | Non-cash compensation | $1,738 | ($592) | | Capitalized interest | ($1,688) | — | | **Non-GAAP adjusted net loss** | **($7,415)** | **($28,384)** | [Additional Information](index=4&type=section&id=Additional%20Information) This section provides details on the investor conference call, company overview, and important disclaimers regarding forward-looking statements and non-GAAP measures [Investor Conference Call Information](index=4&type=section&id=Investor%20Conference%20Call%20and%20Webcast) The company will host an investor conference call and webcast on August 12, 2025, to discuss the Q2 2025 results - The investor conference call to present Q2 2025 results is scheduled for **Tuesday, August 12, 2025, at 8:30 AM ET**[13](index=13&type=chunk) [About Seaport Entertainment Group](index=4&type=section&id=About%20Seaport%20Entertainment%20Group) Seaport Entertainment Group is a premier entertainment and hospitality company focused on owning, operating, and developing unique integrated assets - The company's business model focuses on delivering experiences through a combination of **restaurant, entertainment, sports, retail, and hospitality offerings** integrated into one-of-a-kind real estate[15](index=15&type=chunk) [Forward-Looking Statements & Non-GAAP Measures](index=4&type=section&id=Safe%20Harbor%20and%20Forward-Looking%20Statements) This section includes standard safe harbor statements for forward-looking information and explains the use of supplemental non-GAAP financial measures - The press release contains **forward-looking statements** that are based on current expectations and involve risks and uncertainties, as detailed in the company's SEC filings[18](index=18&type=chunk) - **Non-GAAP measures** are used to provide a supplemental view of operating performance by excluding certain **non-cash or non-recurring items** such as **depreciation, amortization, and non-cash compensation**[19](index=19&type=chunk)[21](index=21&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number: 001-42518 MAYWOOD ACQUISITION CORP. (Exact name of registrant as specified in its charter) Cayman Islands N/A (State or ot ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number: 001-42518 MAYWOOD ACQUISITION CORP. (Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR Cayman Islands N/A (State or ot ...

Exhibit 99.1 MidCap Financial Investment Corporation Reports Financial Results for the Quarter Ended June 30, 2025 Results for the Quarter Ended June 30, 2025 and Other Recent Highlights: New York, NY — August 11, 2025 — MidCap Financial Investment Corporation (NASDAQ: MFIC) or the "Company," today announced financial results for the quarter ended June 30, 2025. The Company's net investment income was $0.39 per share for the quarter ended June 30, 2025, compared to $0.37 per share for the quarter ended Marc ...

PART I. FINANCIAL INFORMATION [Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20%E2%80%93%20Interim%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Plug Power Inc.'s unaudited interim condensed consolidated financial statements and detailed notes for Q2 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$3.35 billion** from **$3.60 billion**, and total liabilities decreased to **$1.59 billion** Condensed Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $140,736 | $205,693 | | Inventory, net | $643,926 | $682,642 | | Total current assets | $1,329,997 | $1,477,484 | | **Total Assets** | **$3,353,780** | **$3,602,846** | | **Current Liabilities** | | | | Accounts payable | $152,060 | $180,966 | | Current portion of convertible debt | $145,318 | $58,273 | | Total current liabilities | $835,766 | $748,489 | | **Total Liabilities** | **$1,589,820** | **$1,795,090** | | **Total Stockholders' Equity** | **$1,763,960** | **$1,807,756** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, net revenue increased to **$174.0 million**, and net loss improved to **$227.1 million**, or **($0.20) per share**, from **($0.36) per share** in Q2 2024 Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $173,970 | $143,350 | $307,644 | $263,614 | | Gross loss | $(53,465) | $(131,255) | $(127,326) | $(290,330) | | Operating loss | $(176,946) | $(244,673) | $(355,402) | $(504,082) | | Net loss attributable to Plug Power Inc. | $(227,099) | $(262,333) | $(423,755) | $(558,109) | | Net loss per share (Basic and diluted) | $(0.20) | $(0.36) | $(0.41) | $(0.81) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities improved to **$297.4 million**, while investing cash use decreased and financing cash provided declined Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(297,378) | $(422,466) | | Net cash used in investing activities | $(87,316) | $(268,658) | | Net cash provided by financing activities | $226,064 | $526,751 | | **Decrease in cash and cash equivalents** | **$(64,957)** | **$(72,674)** | [Notes to Interim Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's operations, liquidity, accounting policies, and financial items, including ongoing net losses, financing, and restructuring plans - The company incurred net losses of **$228.7 million** for Q2 2025 and **$425.6 million** for the first six months of 2025, with working capital of **$494.2 million** and **$140.7 million** in unrestricted cash as of June 30, 2025[23](index=23&type=chunk) - The company believes its current working capital, cash position, and access to financing, including an ATM program and Secured Debenture Purchase Agreement, are sufficient to fund operations for at least the next 12 months[32](index=32&type=chunk) - In March 2025, the company initiated a restructuring plan to reduce its workforce and realign its manufacturing footprint, expecting significant annual savings from the second half of 2025[31](index=31&type=chunk)[159](index=159&type=chunk) [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q2 2025 financial condition and results of operations, analyzing revenue, costs, operating expenses, liquidity, and capital resources [Overview](index=61&type=section&id=Overview) Plug Power focuses on hydrogen and fuel cell solutions, offering a vertically integrated product ecosystem for industrial mobility and clean hydrogen production - The company's core focus is on industrial mobility applications and the production of clean hydrogen[177](index=177&type=chunk) - Plug Power provides a vertically integrated product ecosystem including fuel cells, fueling infrastructure, service, electrolyzers, and liquefaction systems[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) [Results of Operations](index=63&type=section&id=Results%20of%20Operations) For Q2 2025, net revenue increased **21.4%** to **$174.0 million**, gross loss improved to **($53.5) million**, and operating loss narrowed to **($176.9) million** Net Revenue and Gross Profit/(Loss) by Segment (Q2 2025 vs Q2 2024, in thousands) | Segment | Net Revenue Q2 2025 | Net Revenue Q2 2024 | Gross Profit/(Loss) Q2 2025 | Gross Profit/(Loss) Q2 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales of equipment, related infrastructure and other | $99,173 | $76,788 | $(18,107) | $(53,123) | | Services performed on fuel cell systems | $16,367 | $13,034 | $6,371 | $(696) | | Power purchase agreements | $23,633 | $19,674 | $(21,639) | $(34,638) | | Fuel delivered to customers | $34,399 | $29,887 | $(31,237) | $(28,430) | | **Total** | **$173,970** | **$143,350** | **$(53,465)** | **$(131,255)** | - Revenue from sales of equipment increased **29.2%** year-over-year in Q2 2025, primarily due to a **$29.8 million** increase in electrolyzer system sales[195](index=195&type=chunk) - Gross margin on services improved to **38.9%** in Q2 2025 from **(5.3%)** in Q2 2024, driven by higher service rates and improved unit performance[211](index=211&type=chunk) - The company recorded an other-than-temporary impairment loss of **$42.5 million** on an equity method investment in Q2 2025 due to declining market conditions[241](index=241&type=chunk) [Liquidity and Capital Resources](index=79&type=section&id=Liquidity%20and%20Capital%20Resources) Despite ongoing net losses, the company bolstered liquidity in 2025 through a **$267.5 million** direct offering and a **$210.0 million** secured debenture, maintaining sufficient resources - In March 2025, the company raised **$267.5 million** in net proceeds from a registered direct offering of common stock, pre-funded warrants, and common warrants[256](index=256&type=chunk) - In May 2025, the company issued an initial tranche of a **15.00%** Secured Debenture for **$199.5 million** in proceeds, with commitments for a second tranche of up to **$105.0 million**[257](index=257&type=chunk) - The company has an 'at-the-market' (ATM) equity offering program with **$986.2 million** of aggregate gross sales price available as of June 30, 2025[254](index=254&type=chunk) - On January 16, 2025, a subsidiary finalized a loan guarantee of up to **$1.66 billion** with the U.S. Department of Energy (DOE) to finance the construction of up to six green hydrogen production facilities[148](index=148&type=chunk)[296](index=296&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures About Market Risk](index=99&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the quantitative and qualitative market risk disclosures from the 2024 Form 10-K - There has been no material change from the market risk disclosures provided in the Company's 2024 Form 10-K[313](index=313&type=chunk) [Item 4 – Controls and Procedures](index=99&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[317](index=317&type=chunk) - No material changes to the internal control over financial reporting occurred during the quarter ended June 30, 2025[318](index=318&type=chunk) PART II. OTHER INFORMATION [Item 1 – Legal Proceedings](index=102&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) The company is involved in several securities class actions and stockholder derivative litigations alleging false statements, with some cases dismissed and others pending motions to dismiss - The 2021 Securities Action was dismissed with prejudice, and the related derivative litigation was also dismissed, with plaintiffs voluntarily dismissing their appeal in June 2025[139](index=139&type=chunk)[140](index=140&type=chunk) - The company is facing a consolidated 2023 Securities Action and a 2024 Securities Litigation, both alleging misstatements about business operations, revenue goals, and hydrogen production progress, which the company is actively defending[141](index=141&type=chunk)[145](index=145&type=chunk) [Item 1A – Risk Factors](index=102&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) There have been no material changes to the risk factors identified in the 2024 Form 10-K and the Q1 2025 Form 10-Q - There have been no material changes to the risk factors identified in the 2024 Form 10-K and the Q1 2025 Form 10-Q[321](index=321&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=102&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On July 8, 2025, the company issued an unregistered warrant to YA II PN, Ltd. to purchase **31.5 million** common shares at **$1.37 per share**, under the Secured Debenture Purchase Agreement - On July 8, 2025, the Company issued a warrant to YA II PN, Ltd. to purchase **31.5 million** shares of common stock at an exercise price of **$1.37 per share**, expiring July 10, 2028[322](index=322&type=chunk) - The warrant was issued as an unregistered security under the exemption provided by Section 4(a)(2) of the Securities Act[322](index=322&type=chunk) [Item 6 – Exhibits](index=105&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, warrants, and CEO/CFO certifications

Exhibit 99.1 MidCap Financial Investment Corporation Reports Financial Results for the Quarter Ended June 30, 2025 Results for the Quarter Ended June 30, 2025 and Other Recent Highlights: New York, NY — August 11, 2025 — MidCap Financial Investment Corporation (NASDAQ: MFIC) or the "Company," today announced financial results for the quarter ended June 30, 2025. The Company's net investment income was $0.39 per share for the quarter ended June 30, 2025, compared to $0.37 per share for the quarter ended Marc ...

[Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements subject to significant risks and uncertainties - Statements in this report are forward-looking, not strictly historical, and are identified by words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "can have," and "likely"[11](index=11&type=chunk) - Key risks and uncertainties that could cause actual results to differ materially include customer spending and demand, the realization of operational or financial benefits from organizational changes, significant fluctuations in operating results, uncertainty regarding CleanCap® revenue, geopolitical instability, competition, product performance, intellectual property protection, and financial structure (indebtedness and Tax Receivable Agreement)[11](index=11&type=chunk)[14](index=14&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statement unless required by law[13](index=13&type=chunk) [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements and accompanying detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024%20(unaudited)) The balance sheet shows a decrease in total assets and stockholders' equity, driven by lower cash and goodwill impairment Condensed Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | **Assets** | | | | | Cash and cash equivalents | $269,907 | $322,399 | $(52,492) | | Accounts receivable, net | $27,882 | $38,520 | $(10,638) | | Inventory | $46,667 | $50,082 | $(3,415) | | Goodwill | $129,429 | $159,878 | $(30,449) | | Total assets | $896,966 | $1,008,244 | $(111,278) | | **Liabilities** | | | | | Total current liabilities | $69,682 | $56,971 | $12,711 | | Total liabilities | $428,983 | $431,035 | $(2,052) | | **Stockholders' Equity** | | | | | Total stockholders' equity | $467,983 | $577,209 | $(109,226) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) The company reported a substantially increased net loss due to lower revenue and goodwill impairment Condensed Consolidated Statements of Operations | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $47,397 | $69,423 | $94,247 | $133,602 | | Cost of revenue | $39,629 | $38,582 | $78,754 | $76,917 | | Goodwill impairment | $30,449 | $— | $42,884 | $— | | Loss from operations | $(66,278) | $(13,440) | $(115,440) | $(32,301) | | Net loss | $(69,837) | $(18,420) | $(122,690) | $(41,100) | | Net loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,591) | $(9,789) | $(69,536) | $(21,867) | | Net loss per Class A common share, basic and diluted | $(0.27) | $(0.07) | $(0.48) | $(0.16) | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(unaudited)) Comprehensive loss increased significantly year-over-year, driven primarily by higher net loss Condensed Consolidated Statements of Comprehensive Loss | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(69,837) | $(18,420) | $(122,690) | $(41,100) | | Foreign currency translation adjustments | $442 | $— | $1,016 | $— | | Total other comprehensive loss | $(69,395) | $(18,420) | $(121,674) | $(41,100) | | Total comprehensive loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,341) | $(9,789) | $(68,962) | $(21,867) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(unaudited)) Total stockholders' equity decreased significantly due to the net loss incurred during the period Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands) | December 31, 2024 | June 30, 2025 | Change | | :-------------------- | :---------------- | :------------ | :----- | | Total Stockholders' Equity | $577,209 | $467,983 | $(109,226) | | Net loss (6 months) | N/A | $(122,690) | N/A | | Stock-based compensation (6 months) | N/A | $17,192 | N/A | | Foreign currency translation adjustment (6 months) | N/A | $1,016 | N/A | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(unaudited)) The company experienced a net decrease in cash, driven by cash used in operating and investing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(19,655) | $8,967 | | Net cash used in investing activities | $(26,365) | $(10,426) | | Net cash used in financing activities | $(6,434) | $(332) | | Net decrease in cash and cash equivalents | $(52,492) | $(1,791) | | Cash and cash equivalents, end of period | $269,907 | $573,171 | - Net cash used in operating activities for the six months ended June 30, 2025, was **$19.7 million**, primarily due to a net loss of **$122.7 million**, partially offset by non-cash adjustments like depreciation, amortization, stock-based compensation, and goodwill impairment[28](index=28&type=chunk)[286](index=286&type=chunk) - Net cash used in investing activities for the six months ended June 30, 2025, was **$26.4 million**, mainly due to cash paid for the acquisitions of Molecular Assemblies (**$8.9 million**) and Officinae Bio (**$10.1 million**), and property and equipment purchases (**$8.1 million**)[28](index=28&type=chunk)[287](index=287&type=chunk) - Net cash used in financing activities for the six months ended June 30, 2025, was **$6.4 million**, primarily from tax payments for shares withheld under employee equity plans (**$4.7 million**) and principal repayments of long-term debt (**$2.7 million**)[28](index=28&type=chunk)[288](index=288&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide crucial context to the financial statements, detailing accounting policies and key financial components [1. Organization and Significant Accounting Policies](index=13&type=section&id=1.%20Organization%20and%20Significant%20Accounting%20Policies) Maravai operates in two segments, Nucleic Acid Production and Biologics Safety Testing, and consolidates Topco LLC's results - Maravai operates in two principal businesses: **Nucleic Acid Production** (mRNA, oligonucleotides, CleanCap®) and **Biologics Safety Testing** (host cell protein, bioprocess impurity detection, viral clearance kits, custom antibody/assay development)[32](index=32&type=chunk) - The company consolidates Topco LLC's financial results, with non-controlling interests representing MLSH 1's portion (approximately **43.4%** as of June 30, 2025)[33](index=33&type=chunk)[57](index=57&type=chunk) - Revenue is recognized when control of promised goods or services is transferred to a customer, with the majority recognized at a single point in time[42](index=42&type=chunk)[55](index=55&type=chunk) Segment Revenue | Segment Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Nucleic Acid Production | $31,085 | $54,586 | (43.1)% | $59,835 | $100,602 | (40.5)% | | Biologics Safety Testing | $16,312 | $14,837 | 9.9% | $34,412 | $33,000 | 4.3% | - Recently issued ASUs (2023-09 for Income Tax Disclosures and 2024-03 for Expense Disaggregation Disclosures) are being evaluated for their impact on consolidated financial statements and disclosures, with effective dates for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[75](index=75&type=chunk)[76](index=76&type=chunk) [2. Acquisitions](index=20&type=section&id=2.%20Acquisitions) The company completed two acquisitions in Q1 2025 to expand its Nucleic Acid Production capabilities - **Molecular Assemblies Acquisition (January 23, 2025):** - Total purchase consideration: **$11.2 million** (**$9.2 million** cash, **$2.0 million** consideration payable) - Acquired assets: Inventory (**$156k**), prepaid expenses (**$138k**), property & equipment (**$4.57 million**), intangible assets (**$3.2 million**) - Goodwill: **$3.4 million**, allocated to Nucleic Acid Production segment, primarily for vertical supply integration synergies - Intangible assets: Developed technology (**$3.2 million**, 13-year useful life)[78](index=78&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - **Officinae Bio Acquisition (February 21, 2025):** - Total purchase consideration: **$15.1 million** (**$9.9 million** cash, **$4.8 million** contingent consideration, **$0.3 million** consideration payable) - Acquired assets: Cash (**$214k**), intangible assets (**$8.18 million**) - Goodwill: **$8.8 million**, allocated to Nucleic Acid Production segment, for technology platform integration and assembled workforce synergies - Intangible assets: Developed technology (**$8.1 million**, 8-year useful life), Customer relationships (**$80k**, 6-year useful life)[86](index=86&type=chunk)[87](index=87&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) [3. Goodwill and Intangible Assets](index=24&type=section&id=3.%20Goodwill%20and%20Intangible%20Assets) The company recorded significant goodwill impairment charges due to lower projected revenues in the Nucleic Acid Production segment - **Goodwill Impairment:** - Total goodwill impairment for six months ended June 30, 2025: **$42.9 million** - Q1 2025: **$12.4 million** impairment for TriLink reporting unit (Nucleic Acid Production) due to lower demand in research/discovery products and slower mRNA clinical trial transitions - Q2 2025: **$30.4 million** impairment for Alphazyme reporting unit (Nucleic Acid Production) due to lower anticipated demand in enzyme products - Goodwill balance as of June 30, 2025: **$129.4 million** (down from **$159.9 million** at Dec 31, 2024)[94](index=94&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk) - **Intangible Assets:** - **No impairment** for finite-lived intangible assets was recorded after recoverability evaluations - Total net intangible assets as of June 30, 2025: **$193.1 million** (down from **$195.0 million** at Dec 31, 2024) - Amortization expense for intangible assets: **$13.0 million** (6 months ended June 30, 2025) within cost of revenue, and **$1.2 million** within SG&A - Estimated future amortization expense for remaining six months of 2025: **$14.4 million**[101](index=101&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) [4. Fair Value Measurements](index=27&type=section&id=4.%20Fair%20Value%20Measurements) The company measures cash equivalents at Level 1 and contingent consideration at Level 3 fair value - Cash and cash equivalents (money market funds) are classified as **Level 1** fair value measurements[108](index=108&type=chunk) - Contingent consideration is classified as a **Level 3** financial liability[108](index=108&type=chunk) - **Alphazyme Contingent Consideration:** Had **no fair value** as of June 30, 2025, as revenue targets for 2023 and 2024 were not met, and no payment is expected for 2025[109](index=109&type=chunk)[110](index=110&type=chunk) - **Officinae Contingent Consideration:** Fair value of **$4.8 million** recognized at acquisition date, increasing to **$4.94 million** by June 30, 2025, due to present value changes[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [5. Balance Sheet Components](index=28&type=section&id=5.%20Balance%20Sheet%20Components) This note details the composition of inventory, accrued expenses, and other long-term liabilities Inventory | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------- | :------------ | :---------------- | :----- | | Raw materials | $16,431 | $16,974 | $(543) | | Work-in-process | $10,519 | $10,050 | $469 | | Finished goods | $19,717 | $23,058 | $(3,341) | | Total inventory | $46,667 | $50,082 | $(3,415) | Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------------------------------- | :------------ | :---------------- | :----- | | Employee related | $16,439 | $17,163 | $(724) | | Operating lease liabilities, current portion | $7,926 | $7,481 | $445 | | Accrued Alphazyme Retention Payments, current | $7,640 | $— | $7,640 | | Contingent consideration, current | $4,940 | $— | $4,940 | | Consideration payable (Molecular Assemblies) | $2,000 | $— | $2,000 | | Total accrued expenses and other current liabilities | $50,202 | $36,407 | $13,795 | Other Long-Term Liabilities | Other Long-Term Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Operating lease liabilities, non-current | $37,750 | $41,381 | $(3,631) | | Accrued Alphazyme Retention Payments, non-current | $— | $6,580 | $(6,580) | | Acquisition related tax liability | $— | $4,082 | $(4,082) | | Total other long-term liabilities | $38,186 | $52,455 | $(14,269) | [6. Government Assistance](index=29&type=section&id=6.%20Government%20Assistance) The company completed its Cooperative Agreement with HHS, receiving the full $38.8 million award - TriLink has a Cooperative Agreement with the U.S. Department of Health and Human Services (HHS) to advance domestic manufacturing capabilities and expand production capacity for mRNA vaccines and therapeutics[118](index=118&type=chunk) - The award amount was **$38.8 million**, representing 50% of the construction and validation costs for the Flanders San Diego Facility[120](index=120&type=chunk) - The company received **$0.7 million** in reimbursements during the six months ended June 30, 2025, and had utilized and received the full award amount by the end of the first quarter of 2025[121](index=121&type=chunk) [7. Commitments and Contingencies](index=30&type=section&id=7.%20Commitments%20and%20Contingencies) The company has purchase obligations and is involved in legal proceedings which it intends to vigorously defend - Unconditional purchase obligations as of June 30, 2025, totaled **$0.9 million**, relating to the remaining six months of 2025 and the year ending December 31, 2026[123](index=123&type=chunk) - The company is involved in a **Securities Class Action lawsuit** (Nelson v. Maravai Lifesciences Holdings, Inc., et al.) filed March 3, 2025, alleging federal securities law violations[125](index=125&type=chunk) - Two purported **stockholder derivative lawsuits** (Mercer v. Martin, et al. and Husurianto v. Martin, et al.) were filed in June and July 2025, alleging breaches of fiduciary duties and Exchange Act violations[126](index=126&type=chunk) - The company intends to vigorously defend these legal actions and **cannot reasonably estimate any potential loss** or range of loss that may arise from them[127](index=127&type=chunk) [8. Long-Term Debt](index=31&type=section&id=8.%20Long-Term%20Debt) The company's long-term debt consists of a Term Loan with $297.0 million outstanding as of June 30, 2025 - The Credit Agreement provides for a **$600.0 million Term Loan** facility (maturing October 2027) and a **$167.0 million revolving credit facility** (maturing October 2029)[129](index=129&type=chunk) - As of June 30, 2025, the Term Loan had an outstanding balance of **$297.0 million** and an effective interest rate of **7.27%** per annum[130](index=130&type=chunk)[137](index=137&type=chunk) - There were **no outstanding borrowings** under the Revolving Credit Facility as of June 30, 2025, and the company was in compliance with all debt covenants[134](index=134&type=chunk)[137](index=137&type=chunk) Future Principal Maturities | Future Principal Maturities (in thousands) | Amount | | :--------------------------------------- | :----- | | 2025 (remaining six months) | $2,720 | | 2026 | $5,440 | | 2027 | $288,800 | | Total long-term debt | $296,960 | [9. Net Loss Per Class A Common Share Attributable to Maravai LifeSciences Holdings, Inc.](index=32&type=section&id=9.%20Net%20Loss%20Per%20Class%20A%20Common%20Share%20Attributable%20to%20Maravai%20LifeSciences%20Holdings%2C%20Inc.) The company reported an increased net loss per Class A common share compared to the prior year Net Loss Per Class A Common Share | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,591) | $(9,789) | $(69,536) | $(21,867) | | Weighted average Class A common shares outstanding | 144,236 | 135,842 | 143,833 | 134,088 | | Net loss per Class A common share, basic and diluted | $(0.27) | $(0.07) | $(0.48) | $(0.16) | - Potentially dilutive securities (restricted stock units, stock options, Class B common stock) were excluded from the computation of diluted net loss per share because their effect would have been **anti-dilutive** due to the reported net loss[141](index=141&type=chunk) [10. Income Taxes](index=33&type=section&id=10.%20Income%20Taxes) The company reported an income tax benefit with an effective tax rate lower than the statutory rate Income Tax Benefit and Effective Tax Rate | Metric (in thousands, except percentages) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loss before income taxes | $(74,125) | $(20,855) | $(126,816) | $(43,264) | | Income tax benefit | $(4,288) | $(2,435) | $(4,126) | $(2,164) | | Effective tax rate | 5.8% | 11.7% | 3.3% | 5.0% | - The effective tax rates for the three and six months ended June 30, 2025, were **5.8%** and **3.3%** respectively, differing from the U.S. federal statutory rate of 21.0% primarily due to loss associated with non-controlling interest, the valuation allowance recorded against deferred tax assets, and the release of a previous uncertain tax position[143](index=143&type=chunk) - **No tax distributions** were made to Topco LLC's unit holders during the three and six months ended June 30, 2025[149](index=149&type=chunk) - The recently enacted One Big Beautiful Bill Act (OBBBA) on July 4, 2025, includes significant tax provisions that the company is currently assessing for impact on its consolidated financial statements[150](index=150&type=chunk) [11. Related Party Transactions](index=34&type=section&id=11.%20Related%20Party%20Transactions) The company has a Tax Receivable Agreement with related parties, but no payments were made in 2025 or 2024 - The company is a party to a **Tax Receivable Agreement (TRA)** with MLSH 1 and MLSH 2, which provides for payments of 85% of certain tax benefits realized by the company[152](index=152&type=chunk) - As of June 30, 2025, there was **no current liability outstanding** under the TRA[153](index=153&type=chunk) - The non-current liability under the TRA (**$683.8 million** as of December 31, 2024) was derecognized because it was **not probable** that the company would realize the remaining tax benefits based on estimates of future taxable income[154](index=154&type=chunk) - **No payments were made** to MLSH 1 or MLSH 2 pursuant to the TRA during the three and six months ended June 30, 2025, or 2024[155](index=155&type=chunk) [12. Segments](index=35&type=section&id=12.%20Segments) The company operates in two segments, with Adjusted EBITDA as the key performance measure - The company operates in two reportable segments: **Nucleic Acid Production** (manufacturing and sale of highly modified nucleic acids) and **Biologics Safety Testing** (manufacturing and sale of host cell protein, bioprocess impurity detection, viral clearance kits, and associated services)[158](index=158&type=chunk) - **Adjusted EBITDA** is the profit or loss measure used by the Chief Operating Decision Maker (CODM) to allocate resources and evaluate segment performance, excluding certain non-cash and other adjustments not considered representative of ongoing operations[157](index=157&type=chunk) Adjusted EBITDA by Segment | Segment (in thousands) | 3 Months Ended June 30, 2025 (Adj. EBITDA) | 3 Months Ended June 30, 2024 (Adj. EBITDA) | 6 Months Ended June 30, 2025 (Adj. EBITDA) | 6 Months Ended June 30, 2024 (Adj. EBITDA) | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Nucleic Acid Production | $(7,270) | $17,453 | $(16,170) | $27,541 | | Biologics Safety Testing | $10,860 | $9,365 | $23,531 | $23,291 | | Total Adjusted EBITDA | $3,590 | $26,818 | $7,361 | $50,832 | [13. Subsequent Event](index=39&type=section&id=13.%20Subsequent%20Event) The company announced a Corporate Realignment Plan to reduce operating costs by over $50.0 million annually - On August 11, 2025, the company announced a Corporate Realignment Plan, including a workforce reduction expected to impact approximately **25%** of its workforce[168](index=168&type=chunk) - The Corporate Realignment Plan is designed to significantly reduce operating costs by **more than $50.0 million annually**[187](index=187&type=chunk) - The company estimates it will incur restructuring costs of approximately **$8.0 million to $9.0 million**, primarily for employee severance and benefits, with the majority expected in the second half of 2025[168](index=168&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of the company's financial condition and results of operations [Overview](index=41&type=section&id=Overview) Maravai reported significant revenue declines due to the absence of high-volume CleanCap® orders - Maravai provides critical products for drug therapies, diagnostics, novel vaccines, and human disease research, serving top global biopharmaceutical companies, emerging firms, and academic institutions[172](index=172&type=chunk) Revenue by Segment | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenue | $47.4 | $69.4 | $94.2 | $133.6 | | Nucleic Acid Production Revenue | $31.1 | $54.6 | $59.8 | $100.6 | | Biologics Safety Testing Revenue | $16.3 | $14.8 | $34.4 | $33.0 | - The decrease in Nucleic Acid Production revenue was primarily due to the absence of high-volume CleanCap® sales for commercialized vaccine programs, which accounted for **$24.4 million** in Q2 2024 and **$33.4 million** in H1 2024[177](index=177&type=chunk)[178](index=178&type=chunk) - Recent developments include the acquisitions of Molecular Assemblies (**$11.2 million**) and Officinae Bio (**$15.1 million**) in Q1 2025, executive leadership transition (new CEO and CFO in June 2025), and a Corporate Realignment Plan announced in August 2025 to reduce operating costs by **over $50 million annually** through workforce reductions (**25%** of employees)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) [Trends and Uncertainties](index=43&type=section&id=Trends%20and%20Uncertainties) The company faces significant headwinds from the absence of high-volume CleanCap® sales and geopolitical tensions - The company generated **no revenue** from high-volume CleanCap® orders for commercial phase vaccine programs during the three and six months ended June 30, 2025, and does not expect to generate such revenue for the remainder of 2025[192](index=192&type=chunk) - Revenue from high-volume CleanCap® sales represented approximately **35.2%** of total revenues for Q2 2024 and **25.0%** for H1 2024[192](index=192&type=chunk) - The absence of CleanCap® sales is expected to **significantly decrease** the company's revenue, profitability, and cash flows in 2025 compared to prior year periods[192](index=192&type=chunk) - Ongoing headwinds include general economic contraction in Asia (especially China) and geopolitical tensions, which may negatively impact future demand and revenues[193](index=193&type=chunk) - It is reasonably possible that estimates of undiscounted cash flows may change in the near term, potentially leading to a **write-down** of affected long-lived assets[194](index=194&type=chunk) [How We Assess Our Business](index=44&type=section&id=How%20We%20Assess%20Our%20Business) The company assesses its business performance using revenue and Adjusted EBITDA, a non-GAAP measure - The key measures used to assess business performance are **revenue** and **Adjusted EBITDA**[195](index=195&type=chunk) - Adjusted EBITDA is a non-GAAP financial measure defined as net loss adjusted for interest, provision for income taxes, depreciation, amortization, stock-based compensation expenses, and other non-cash/non-recurring items[196](index=196&type=chunk) - Adjusted EBITDA is used by management to evaluate financial performance and strategies, and by analysts/investors for industry comparisons[197](index=197&type=chunk) - Limitations of Adjusted EBITDA include not reflecting capital expenditures, working capital needs, income taxes, asset replacement costs, and the non-cash component of employee compensation expense[198](index=198&type=chunk) [Components of Results of Operations](index=44&type=section&id=Components%20of%20Results%20of%20Operations) This section details the components of the company's financial results, including revenue, costs, and operating expenses - Revenue is primarily generated from product sales and, to a lesser extent, service revenue, across the Nucleic Acid Production and Biologics Safety Testing segments[200](index=200&type=chunk) - Cost of revenue includes manufacturing costs, personnel, stock-based compensation, inventory write-downs, materials, labor, overhead, packaging, delivery, and allocated costs[204](index=204&type=chunk) - Selling, general and administrative expenses are expected to **decrease** in future periods due to the implementation of the Corporate Realignment Plan[206](index=206&type=chunk) - Research and development costs are also expected to **decrease** in future periods as a result of the Corporate Realignment Plan[208](index=208&type=chunk) - Goodwill impairment of **$30.4 million** and **$42.9 million** was recorded for the three and six months ended June 30, 2025, respectively[210](index=210&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Financial results show significant declines in revenue and net income, driven by lower CleanCap® sales and goodwill impairment Comparison of Results | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Revenue | $47,397 | $69,423 | (31.7)% | $94,247 | $133,602 | (29.5)% | | Cost of revenue | $39,629 | $38,582 | 2.7% | $78,754 | $76,917 | 2.4% | | Selling, general and administrative | $38,575 | $40,556 | (4.9)% | $78,139 | $81,441 | (4.1)% | | Research and development | $4,882 | $4,924 | (0.9)% | $9,770 | $9,956 | (1.9)% | | Goodwill impairment | $30,449 | $— | * | $42,884 | $— | * | | Loss from operations | $(66,278) | $(13,440) | 393.1% | $(115,440) | $(32,301) | 257.4% | | Net loss | $(69,837) | $(18,420) | 279.1% | $(122,690) | $(41,100) | 198.5% | | Net loss per Class A common share | $(0.27) | $(0.07) | | $(0.48) | $(0.16) | | | Adjusted EBITDA (Non-GAAP) | $(10,410) | $12,989 | | $(20,959) | $20,784 | | - Nucleic Acid Production revenue **decreased by 43.1%** for Q2 2025 and **40.5%** for H1 2025 year-over-year, primarily due to the absence of high-volume CleanCap® orders for commercial phase vaccine programs[224](index=224&type=chunk)[227](index=227&type=chunk) - Biologics Safety Testing revenue **increased by 9.9%** for Q2 2025 and **4.3%** for H1 2025 year-over-year, driven by strength in Host Cell Protein (HCP) kits and associated HCP qualification services, and increased demand for MockV viral clearance kits[225](index=225&type=chunk)[228](index=228&type=chunk) - Gross profit margin **decreased significantly to 16.4%** for both Q2 and H1 2025, from 44.4% and 42.4% in the respective prior-year periods, mainly due to increased excess and obsolete inventory reserve and higher fixed facility costs as a percentage of sales[231](index=231&type=chunk)[233](index=233&type=chunk) - Selling, general and administrative expenses **decreased by 4.9%** for Q2 2025 and **4.1%** for H1 2025 year-over-year, primarily due to a decrease in stock-based compensation expense (related to forfeitures from the Executive Leadership Transition) and facilities expense, partially offset by increased professional service fees and severance payments[235](index=235&type=chunk)[236](index=236&type=chunk) [Relationship with GTCR, LLC](index=58&type=section&id=Relationship%20with%20GTCR%2C%20LLC) Entities affiliated with GTCR, LLC control a majority of the company's voting power - Investment entities affiliated with GTCR, LLC collectively controlled approximately **51%** of the voting power of the company's common stock as of June 30, 2025[260](index=260&type=chunk) - The company is a party to a **Tax Receivable Agreement (TRA)** with MLSH 1 (primarily owned by GTCR) and MLSH 2, which provides for payments of 85% of certain tax benefits[262](index=262&type=chunk) - **No current liability** was outstanding under the TRA as of June 30, 2025, and **no payments were made** under the TRA during the three and six months ended June 30, 2025, or 2024[263](index=263&type=chunk)[265](index=265&type=chunk) - The non-current TRA liability was derecognized as it was determined **not probable** that the company would generate sufficient future taxable income to utilize the related tax benefits[264](index=264&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash from operations and long-term debt, despite increased cash usage [Overview](index=58&type=section&id=Overview) The company expects existing cash and operational cash flow to be sufficient for the next 12 months - The company's operations have been financed primarily from cash flow from operations, borrowings under long-term debt agreements, and sales of Class A common stock[268](index=268&type=chunk) - As of June 30, 2025, the company had cash and cash equivalents of **$269.9 million**[266](index=266&type=chunk) - The company believes its cash on hand, cash generated from operations, and continued access to credit facilities will be **sufficient to satisfy cash requirements** over the next 12 months and beyond[269](index=269&type=chunk) - **No probable future payments** are expected under the Tax Receivable Agreement (TRA) relating to the purchase of LLC Units, as a valuation allowance has been recorded against deferred tax assets, indicating insufficient future taxable income to utilize related tax benefits[270](index=270&type=chunk)[271](index=271&type=chunk) [Credit Agreement](index=59&type=section&id=Credit%20Agreement) The company was in compliance with all covenants under its Credit Agreement as of June 30, 2025 - The Credit Agreement provides for a **$600.0 million Term Loan** facility (maturing October 2027) and a **$167.0 million Revolving Credit Facility** (maturing October 2029)[274](index=274&type=chunk) - As of June 30, 2025, **$297.0 million** was outstanding under the Term Loan, bearing an effective interest rate of **7.27%** per annum[275](index=275&type=chunk) - There were **no outstanding borrowings** under the Revolving Credit Facility as of June 30, 2025[275](index=275&type=chunk) - The company was **in compliance with all covenants** under the Credit Agreement as of June 30, 2025[280](index=280&type=chunk) [Tax Receivable Agreement](index=60&type=section&id=Tax%20Receivable%20Agreement) The TRA liability remains derecognized due to the unlikelihood of realizing sufficient future taxable income - The Tax Receivable Agreement (TRA) provides for the payment by the company to MLSH 1 and MLSH 2 of **85%** of certain tax benefits realized[281](index=281&type=chunk) - As of June 30, 2025, there was **no current liability outstanding** under the TRA[282](index=282&type=chunk) - The non-current portion of the TRA liability remains derecognized as it was determined **not probable** that the company will generate sufficient future taxable income to utilize the related tax benefits[284](index=284&type=chunk) - Payments under the TRA, if required, are generally due within 125 days after the extended due date of the U.S. federal income tax return, with interest accruing from the due date[282](index=282&type=chunk) [Cash Flows](index=61&type=section&id=Cash%20Flows) The company experienced a net decrease in cash of $52.5 million for the first half of 2025 Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(19,655) | $8,967 | | Net cash used in investing activities | $(26,365) | $(10,426) | | Net cash used in financing activities | $(6,434) | $(332) | | Net decrease in cash and cash equivalents | $(52,492) | $(1,791) | - Net cash used in operating activities for H1 2025 was **$19.7 million**, primarily due to a net loss of **$122.7 million**, partially offset by non-cash adjustments (depreciation, amortization, stock-based compensation, goodwill impairment)[286](index=286&type=chunk) - Net cash used in investing activities for H1 2025 was **$26.4 million**, mainly for the acquisitions of Molecular Assemblies (**$8.9 million**) and Officinae Bio (**$10.1 million**), and property and equipment purchases (**$8.1 million**)[287](index=287&type=chunk) - Net cash used in financing activities for H1 2025 was **$6.4 million**, primarily from tax payments for shares withheld under employee equity plans (**$4.7 million**) and principal repayments of long-term debt (**$2.7 million**)[288](index=288&type=chunk) [Capital Expenditures](index=61&type=section&id=Capital%20Expenditures) Capital expenditures totaled $7.4 million for the first half of 2025, with future plans under review - Capital expenditures for the six months ended June 30, 2025, totaled **$7.4 million**, net of **$0.7 million** in government funding under the Cooperative Agreement[289](index=289&type=chunk) - The company is currently evaluating its plans for capital expenditures for the year ending December 31, 2025, in connection with the Corporate Realignment Plan[289](index=289&type=chunk) [Contractual Obligations and Commitments](index=62&type=section&id=Contractual%20Obligations%20and%20Commitments) Total contractual obligations and commitments amounted to $386.6 million as of June 30, 2025 Contractual Obligations Summary | Obligation (in thousands) | Total | < 1 year | 1-3 years | 4-5 years | 5+ years | | :------------------------ | :--------- | :--------- | :--------- | :--------- | :--------- | | Operating leases | $52,251 | $10,848 | $18,545 | $18,252 | $4,606 | | Finance leases | $29,494 | $3,478 | $7,272 | $7,715 | $11,029 | | Debt obligations | $296,960 | $5,440 | $291,520 | $— | $— | | Unconditional purchase obligations | $940 | $788 | $152 | $— | $— | | Contingent consideration (Officinae) | $4,940 | $4,940 | $— | $— | $— | | Consideration payable (Molecular) | $2,000 | $2,000 | $— | $— | $— | | **Total** | **$386,585** | **$27,494** | **$317,489** | **$25,967** | **$15,635** | - Contingent payments for Alphazyme (up to **$25.0 million**) and retention payments (**$9.3 million**, with **$7.6 million** accrued as of June 30, 2025) are not included in the table as their payment is not currently determinable or probable[294](index=294&type=chunk) [Critical Accounting Policies and Estimates](index=62&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on significant judgments, particularly for goodwill impairment - A quantitative goodwill impairment test was performed on the Alphazyme reporting unit in Q2 2025 due to lower projected revenues, resulting in a **$30.4 million impairment charge**[299](index=299&type=chunk) - Determining the fair value of intangible assets acquired in business combinations requires significant judgment and estimates, including valuation methodologies, assumptions about future net cash flows, discount rates, and market participants[301](index=301&type=chunk)[302](index=302&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from variable-rate debt and foreign currency risk from international sales - The company's primary exposure to interest rate risk is associated with its variable-rate long-term debt, with **$297.0 million** outstanding under the Term Loan as of June 30, 2025[305](index=305&type=chunk) - A hypothetical **100 basis point** increase or decrease in overall interest rates would have changed interest expense by approximately **$0.8 million** for the three months and **$1.5 million** for the six months ended June 30, 2025[306](index=306&type=chunk) - Substantially all of the company's revenue is denominated in U.S. dollars, even for international sales (approximately **35.4%** for Q2 2025 and **36.4%** for H1 2025)[308](index=308&type=chunk) - The company has **not entered into any hedging arrangements** with respect to foreign currency risk to date, but will reassess its approach as international operations grow[308](index=308&type=chunk) [Item 4. Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were not effective due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were **not effective** at a reasonable assurance level as of June 30, 2025, due to material weaknesses in internal control over financial reporting[309](index=309&type=chunk) - Material weaknesses identified include ineffective controls over the **revenue process** (timing of revenue recognition, segregation of duties, accounting for product revenue, pricing approvals) and ineffective controls over key inputs and assumptions for **goodwill impairment assessment**[311](index=311&type=chunk) - **Remediation plans are in progress**, including remediating existing revenue process controls, designing new pricing authorization controls, reviewing order entry data, monitoring work order activity, and enhancing management review controls for goodwill impairment inputs and assumptions[312](index=312&type=chunk)[317](index=317&type=chunk) [PART II - OTHER INFORMATION](index=63&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) Current legal proceedings are not expected to have a material adverse effect on the company's financial condition - The company is involved in various legal proceedings and subject to claims arising in the normal course of business[319](index=319&type=chunk) - As of the date of this report, none of such loss contingencies, either individually or in the aggregate, are expected to have a **material adverse effect** on the company's consolidated financial position, results of operations, or cash flows[319](index=319&type=chunk) [Item 1A. Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) Material changes to risk factors relate to recent organizational changes, including executive transitions and restructuring - Material changes to risk factors relate to recent organizational changes, including changes to the executive management team and the **Corporate Realignment Plan**[320](index=320&type=chunk)[321](index=321&type=chunk) - Risks associated with the Corporate Realignment Plan (organizational restructuring and workforce reduction impacting approximately **25%** of employees) include not realizing expected operational or financial benefits, higher than anticipated restructuring charges, and unintended consequences such as adverse impacts on revenues, employee attrition, and morale[322](index=322&type=chunk)[323](index=323&type=chunk) - Executive management transitions can lead to loss of institutional knowledge, changes in strategic goals, uncertainty, higher attrition, business disruption, and negative impacts on financial performance[324](index=324&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period [Item 3. Defaults Upon Senior Securities](index=66&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period [Item 4. Mine Safety Disclosures](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Item 5. Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No insider trading arrangements were adopted or terminated by directors or officers during the quarter - None of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[329](index=329&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational and employment documents - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws[330](index=330&type=chunk) - Employment agreements for the new Chief Executive Officer (Bernd Brust) and Chief Financial Officer (Rajesh Asarpota) are filed[330](index=330&type=chunk) - Forms of Restricted Stock Unit Grant Notice, Stock Option Grant Notice, and Performance Stock Unit Grant Notice are included[330](index=330&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and Section 1350 of the Sarbanes-Oxley Act of 2002 are filed[330](index=330&type=chunk) [Signatures](index=69&type=section&id=Signatures) The report was duly signed by the company's Chief Financial Officer on August 11, 2025 - The report was signed by Rajesh Asarpota, Chief Financial Officer of Maravai LifeSciences Holdings, Inc., on August 11, 2025[334](index=334&type=chunk)

FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 2025 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Commission File Number: 333-207889 GROWGENERATION CORP. (Exact name of registrant as specified in its charter) Colorado 46-5008129 (State or other jurisdiction of incorporation) 5619 DTC Parkw ...

PART I – FINANCIAL INFORMATION This section provides SmartFinancial, Inc.'s unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents SmartFinancial, Inc.'s unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements, along with detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) SmartFinancial, Inc. and Subsidiary's Consolidated Balance Sheets show total assets increased to $5.49 billion at June 30, 2025, from $5.28 billion at December 31, 2024, driven by increases in loans and leases, net, and total deposits Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------ | :----------------------------- | :------------------------------- | | Total assets | $5,490,863 | $5,275,904 | | Loans and leases, net | $4,084,286 | $3,868,917 | | Total deposits | $4,872,120 | $4,686,483 | | Total liabilities | $4,971,736 | $4,784,443 | | Total shareholders' equity | $519,127 | $491,461 | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) SmartFinancial, Inc. and Subsidiary reported increased net income for both the three and six months ended June 30, 2025, compared to the same periods in 2024, reaching $11.7 million and $23.0 million respectively Consolidated Statements of Income (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total interest income | $69,453 | $61,285 | $135,830 | $121,067 | | Total interest expense | $29,110 | $28,471 | $57,248 | $56,532 | | Net interest income | $40,343 | $32,814 | $78,582 | $64,535 | | Provision for credit losses | $2,411 | $883 | $3,391 | $443 | | Net income | $11,705 | $8,003 | $22,959 | $17,360 | | Basic earnings per common share | $0.70 | $0.48 | $1.37 | $1.03 | | Diluted earnings per common share | $0.69 | $0.48 | $1.36 | $1.03 | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) SmartFinancial, Inc. and Subsidiary's comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily due to higher net income and substantial unrealized holding gains on available-for-sale securities, net of tax Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $11,705 | $8,003 | $22,959 | $17,360 | | Unrealized gains (losses) on securities available-for-sale, net of tax | $2,168 | $1,506 | $5,871 | $(772) | | Total other comprehensive income | $2,373 | $1,627 | $6,397 | $109 | | Comprehensive income | $14,078 | $9,630 | $29,356 | $17,469 | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) SmartFinancial, Inc. and Subsidiary's total shareholders' equity increased to $519.1 million at June 30, 2025, from $491.5 million at December 31, 2024, driven by net income and other comprehensive income, partially offset by common stock dividends Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :--------------------------------------------------- | :------------------------------- | :--------------------------- | | Total shareholders' equity attributable to SmartFinancial Inc. and Subsidiary | $491,348 | $519,014 | | Total shareholders' equity | $491,461 | $519,127 | | Net income (six months ended June 30, 2025) | N/A | $22,959 | | Other comprehensive income (six months ended June 30, 2025) | N/A | $6,397 | | Common stock dividend (six months ended June 30, 2025) | N/A | $(2,722) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) SmartFinancial, Inc. and Subsidiary experienced a net decrease in cash and cash equivalents of $22.5 million for the six months ended June 30, 2025, primarily due to significant cash used in investing activities, partially offset by cash provided by operating and financing activities Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $28,309 | $23,619 | | Net cash used in investing activities | $(232,349) | $(75,765) | | Net cash provided by financing activities | $181,566 | $42,710 | | Net change in cash and cash equivalents | $(22,474) | $(9,436) | | Cash and cash equivalents, end of period | $365,096 | $342,835 | [Condensed Notes to Consolidated Financial Statements](index=11&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) The Condensed Notes provide detailed disclosures on SmartFinancial's financial reporting policies, accounting estimates, and specific financial statement line items [Note 1. Presentation of Financial Information](index=11&type=section&id=Note%201.%20Presentation%20of%20Financial%20Information) SmartFinancial, a bank holding company, presents unaudited interim financial statements under GAAP, noting no significant impact from recent or upcoming accounting pronouncements - SmartFinancial, Inc. is a bank holding company operating through SmartBank, providing financial services in East and Middle Tennessee, Alabama, and Florida, with primary products including various deposit types and commercial, residential, and consumer loans[20](index=20&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) on December 31, 2024, with **no impact** on its Consolidated Financial Statements[23](index=23&type=chunk) - The company is assessing ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures), with adoption dates in 2025 and 2026/2027 respectively, neither of which are expected to have a **significant impact** on its Consolidated Financial Statements[26](index=26&type=chunk)[27](index=27&type=chunk) [Note 2. Earnings Per Share](index=13&type=section&id=Note%202.%20Earnings%20Per%20Share) Basic and diluted earnings per common share for SmartFinancial, Inc. increased significantly for both the three and six months ended June 30, 2025, compared to 2024, reflecting higher net income Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income available to common shareholders | $11,705 | $8,003 | $22,959 | $17,360 | | Average common shares outstanding – basic | 16,778,988 | 16,770,819 | 16,773,293 | 16,810,277 | | Basic earnings per share | $0.70 | $0.48 | $1.37 | $1.03 | | Average common shares outstanding - diluted | 16,878,736 | 16,850,250 | 16,875,608 | 16,887,374 | | Diluted earnings per common share | $0.69 | $0.48 | $1.36 | $1.03 | [Note 3. Securities](index=13&type=section&id=Note%203.%20Securities) SmartFinancial's securities portfolio includes available-for-sale (AFS) and held-to-maturity (HTM) securities, with AFS totaling $502.2 million and HTM $122.8 million at June 30, 2025, and no credit loss allowance deemed necessary Securities Portfolio (Fair Value, in thousands) | Category | June 30, 2025 (Fair Value, in thousands) | December 31, 2024 (Fair Value, in thousands) | | :----------------------------- | :------------------------------------- | :------------------------------------- | | Securities available-for-sale | $502,150 | $482,328 | | Securities held-to-maturity | $108,134 | $108,080 | - For the six months ended June 30, 2025, the Company recorded **$4 thousand in gross realized losses** on investments, with no gross realized gains[34](index=34&type=chunk) - Unrealized losses on AFS and HTM securities at June 30, 2025, are primarily due to changes in interest rates, not credit quality, and **no allowance for credit losses** was deemed necessary for these securities[40](index=40&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk) - All debt securities classified as held-to-maturity with a published rating were rated **A+ or higher** by ratings agencies at June 30, 2025[42](index=42&type=chunk) Investment Type (in thousands) | Investment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | | Federal Reserve Bank stock | $9,604 | $9,045 | | Federal Home Loan Bank stock | $4,759 | $5,345 | | First National Bankers Bank stock | $350 | $350 | | Total | $14,713 | $14,740 | [Note 4. Loans and Leases and Allowance for Credit Losses](index=21&type=section&id=Note%204.%20Loans%20and%20Leases%20and%20Allowance%20for%20Credit%20Losses) SmartFinancial's total loans and leases increased to $4.12 billion at June 30, 2025, from $3.91 billion at December 31, 2024, with the allowance for credit losses (ACL) increasing to $39.8 million, maintaining a 0.96% ratio Loans and Leases (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------ | :--------------------------- | :------------------------------- | | Commercial real estate: Non-owner occupied | $1,114,133 | $1,080,404 | | Commercial real estate: Owner occupied | $958,989 | $867,678 | | Consumer real estate | $803,270 | $741,836 | | Construction and land development | $391,155 | $361,735 | | Commercial and industrial | $778,754 | $775,620 | | Leases | $62,495 | $64,878 | | Consumer and other | $15,266 | $14,189 | | Total loans and leases | $4,124,062 | $3,906,340 | | Less: Allowance for credit losses | $(39,776) | $(37,423) | | Loans and leases, net | $4,084,286 | $3,868,917 | - The provision for credit losses on loans and leases for the six months ended June 30, 2025, was **$2.6 million**, an increase of **$1.8 million** compared to $818 thousand in the same period of 2024, driven by increased loan and lease volume[57](index=57&type=chunk)[181](index=181&type=chunk) - The allowance for credit losses as a percentage of total loans and leases remained stable at **0.96%** at both June 30, 2025, and December 31, 2024[57](index=57&type=chunk)[181](index=181&type=chunk) Nonaccrual Loans (in thousands) | Category | June 30, 2025 (Amount, in thousands) | December 31, 2024 (Amount, in thousands) | | :------------------------------ | :----------------------------------- | :----------------------------------- | | Commercial real estate: Non-owner occupied | $572 | $514 | | Commercial real estate: Owner occupied | $915 | $906 | | Consumer real estate | $1,233 | $1,995 | | Construction and land development | $0 | $39 | | Commercial and industrial | $2,612 | $1,820 | | Leases | $2,556 | $2,433 | | Consumer and other | $1 | $2 | | Total Nonaccrual Loans | $7,889 | $7,709 | - Total collateral-dependent loans individually evaluated for expected credit losses were **$7.7 million** at June 30, 2025, down from $9.6 million at December 31, 2024[72](index=72&type=chunk) - Loan modifications to borrowers experiencing financial difficulty were minimal, totaling **$78 thousand** for the six months ended June 30, 2025, primarily involving term extensions for consumer real estate and commercial and industrial loans[73](index=73&type=chunk)[74](index=74&type=chunk) - No modified loans defaulted in the past twelve months[75](index=75&type=chunk) [Note 5. Goodwill and Intangible Assets](index=32&type=section&id=Note%205.%20Goodwill%20and%20Intangible%20Assets) SmartFinancial's goodwill remained stable at $96.1 million at June 30, 2025, with other intangible assets decreasing slightly to $7.4 million net due to ongoing amortization - The carrying amount of goodwill was **$96.1 million** at June 30, 2025, and December 31, 2024, with **no impairment test conditions** present[79](index=79&type=chunk)[77](index=77&type=chunk) Other Intangible Assets (Net, in thousands) | Category | June 30, 2025 (Net, in thousands) | December 31, 2024 (Net, in thousands) | | :----------------------------- | :-------------------------------- | :------------------------------------ | | Core Deposit Intangibles | $5,218 | $6,035 | | Customer Relationships Intangibles | $2,225 | $2,543 | | Total | $7,443 | $8,578 | - Aggregate amortization expense for other intangible assets was **$566 thousand** for the three months and **$1.1 million** for the six months ended June 30, 2025[80](index=80&type=chunk) [Note 6. Borrowings, Line of Credit and Subordinated Debt](index=33&type=section&id=Note%206.%20Borrowings%2C%20Line%20of%20Credit%20and%20Subordinated%20Debt) SmartFinancial's total borrowings decreased to $7.0 million at June 30, 2025, from $8.1 million at December 31, 2024, primarily due to reduced securities sold under repurchase agreements, while subordinated debt remained stable at $40 million Borrowings (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------------- | :--------------------------- | :------------------------------- | | Securities sold under customer repurchase agreements | $2,966 | $4,135 | | Other borrowings | $4,000 | $4,000 | | Total | $6,966 | $8,135 | - The Company has **$40 million** of 5.625% fixed-to-floating rate subordinated notes outstanding, which qualify as Tier 2 capital[87](index=87&type=chunk)[88](index=88&type=chunk) - Unamortized debt issuance costs for subordinated debt were **$274 thousand** at June 30, 2025[87](index=87&type=chunk)[89](index=89&type=chunk) - The Company has a **$35 million** revolving line of credit, with **$4.0 million** outstanding at June 30, 2025[86](index=86&type=chunk) [Note 7. Employee Benefit Plans](index=34&type=section&id=Note%207.%20Employee%20Benefit%20Plans) SmartFinancial contributed $1.0 million to its 401(k) Plan for the six months ended June 30, 2025, with 1,690,000 Rights available for future grants under the Omnibus Incentive Plan and $3.8 million in unrecognized compensation cost for restricted stock awards - The Company's contribution to the 401(k) Plan for the six months ended June 30, 2025, was **$1.0 million**, up from $955 thousand in 2024[90](index=90&type=chunk) - The Omnibus Incentive Plan, approved May 22, 2025, has **1,690,000 Rights** available for future grants[91](index=91&type=chunk) Stock Options | Metric | Outstanding at Dec 31, 2024 | Exercised (6 months ended Jun 30, 2025) | Outstanding at Jun 30, 2025 | | :-------------------------- | :-------------------------- | :------------------------------------- | :-------------------------- | | Number of Options | 10,148 | (4,203) | 5,945 | | Weighted Average Exercise Price | $15.05 | $15.05 | $15.05 | - The aggregate intrinsic value of total options outstanding and exercisable at June 30, 2025, was **$111 thousand**[96](index=96&type=chunk) Restricted Stock Awards | Metric | Outstanding at Dec 31, 2024 | Granted (6 months ended Jun 30, 2025) | Vested (6 months ended Jun 30, 2025) | Outstanding at Jun 30, 2025 | | :-------------------------- | :-------------------------- | :------------------------------------ | :------------------------------------ | :-------------------------- | | Number of Awards | 195,859 | 97,408 | (53,996) | 237,984 | | Weighted Average Grant-Date Fair Value | $23.02 | $35.19 | $22.09 | $28.21 | - As of June 30, 2025, there was **$3.8 million** of unrecognized compensation cost related to non-vested restricted stock awards, expected to be recognized over a weighted average period of **2.61 years**[97](index=97&type=chunk) [Note 8. Commitments and Contingent Liabilities](index=37&type=section&id=Note%208.%20Commitments%20and%20Contingent%20Liabilities) SmartFinancial has significant off-balance sheet commitments, including $957.2 million in credit extensions and $19.5 million in standby letters of credit, with management not anticipating a material adverse impact from legal proceedings Commitments and Contingent Liabilities (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Commitments to extend credit | $957,162 | $828,755 | | Standby letters of credit | $19,487 | $23,246 | - The allowance for credit losses for off-balance sheet commitments increased to **$3.3 million** at June 30, 2025, from $2.5 million at December 31, 2024[100](index=100&type=chunk) - Management does not anticipate that the aggregate ultimate liability arising from pending or threatened legal proceedings will be **material** to the Company's consolidated financial position[104](index=104&type=chunk) [Note 9. Fair Value Disclosures](index=39&type=section&id=Note%209.%20Fair%20Value%20Disclosures) SmartFinancial uses a three-level hierarchy for fair value measurements, classifying most recurring fair value assets as Level 2 and nonrecurring collateral-dependent loans as Level 3, with no transfers between levels during the period - The Company classifies financial assets and liabilities measured at fair value into three levels based on the observability of inputs: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1 quoted prices), and **Level 3** (unobservable inputs)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Securities available-for-sale and derivative financial instruments are generally classified as **Level 2** for recurring fair value measurements[111](index=111&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk) - Collateral-dependent loans are measured at fair value on a non-recurring basis and are classified as **Level 3**, with fair value determined by independent appraisals and management discounts[116](index=116&type=chunk) - There were **no transfers** between Level 1 and Level 2 or into or out of Level 3 in the fair value hierarchy during the six months ending June 30, 2025[114](index=114&type=chunk) [Note 10. Derivatives Financial Instruments](index=46&type=section&id=Note%2010.%20Derivatives%20Financial%20Instruments) SmartFinancial uses derivatives for fair value and cash flow hedges, as well as non-hedged customer loan hedging programs, with $150 thousand in collateral pledged for derivative contracts at June 30, 2025 - The Company uses interest rate swaps designated as fair value hedges to mitigate interest rate risk on available-for-sale securities, converting fixed rates to SOFR-based variable rates[121](index=121&type=chunk) - Cash flow hedges are used to manage exposure to variability in expected future cash flows due to changes in contractual interest rates, with changes in fair value recorded in AOCI[123](index=123&type=chunk)[124](index=124&type=chunk) - The Company offers a loan hedging program to customers using "back-to-back" interest rate swaps, which are not designated as hedging instruments, and changes in their fair value are recognized in other noninterest income[127](index=127&type=chunk) - Collateral totaling **$150 thousand** was pledged to derivative counterparties at June 30, 2025, to comply with collateral requirements[129](index=129&type=chunk) [Note 11. Leases](index=49&type=section&id=Note%2011.%20Leases) SmartFinancial's leases are primarily operating leases for real estate, recognized as ROU assets of $11.8 million and operating lease liabilities of $12.5 million at June 30, 2025, with net lease costs of $919 thousand for the six months - Substantially all of the Company's leases are operating leases for real estate (branches and office space), recognized as right-of-use (ROU) assets and lease liabilities on the consolidated balance sheet[131](index=131&type=chunk) Lease Assets and Liabilities (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Operating lease right-of-use assets | $11,820 | $11,951 | | Operating lease liabilities | $12,451 | $12,472 | - The weighted average remaining life of the lease term was **10.12 years**, and the weighted average discount rate was **3.55%** at June 30, 2025[132](index=132&type=chunk) Lease Costs (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Operating lease costs | $467 | $468 | $948 | $919 | | Variable lease costs | $20 | $26 | $36 | $56 | | Sublease income | $(41) | $0 | $(65) | $0 | | Net lease cost | $446 | $494 | $919 | $975 | [Note 12. Regulatory Matters](index=51&type=section&id=Note%2012.%20Regulatory%20Matters) SmartFinancial and SmartBank exceeded all minimum regulatory capital requirements and "well capitalized" thresholds at June 30, 2025, with regulatory restrictions limiting dividend payments based on financial conditions - At June 30, 2025, both SmartFinancial and SmartBank exceeded the minimum regulatory capital requirements and the threshold for the **"well capitalized"** regulatory classification, including the Basel III capital conservation buffer[136](index=136&type=chunk)[140](index=140&type=chunk) - The Company adopted ASU 2016-13 (Credit Losses Measurement) on January 1, 2023, and chose the **three-year phase-in option** for its day-one impact on earnings and Tier 1 capital[137](index=137&type=chunk) - During the six months ended June 30, 2025, the Bank paid **$3.0 million** in dividends to the Company, and the Company paid a quarterly common stock dividend of **$0.08 per share**[139](index=139&type=chunk) - Regulatory restrictions from Tennessee banking law and the Federal Reserve limit the Bank's and Company's ability to pay dividends, based on retained net income, capital levels, and other financial conditions[138](index=138&type=chunk) Capital Ratios (in thousands) | Capital Ratio | June 30, 2025 (Actual Amount, in thousands) | June 30, 2025 (Actual Ratio) | Dec 31, 2024 (Actual Amount, in thousands) | Dec 31, 2024 (Actual Ratio) | | :-------------------------------------- | :------------------------------------------ | :--------------------------- | :----------------------------------------- | :--------------------------- | | Total Capital (to Risk Weighted Assets) | $495,344 | 11.04% | $470,635 | 11.10% | | Tier 1 Capital (to Risk Weighted Assets) | $433,782 | 9.67% | $413,616 | 9.76% | | Common Equity Tier 1 Capital (to Risk Weighted Assets) | $433,782 | 9.67% | $413,616 | 9.76% | | Tier 1 Capital (to Average Assets) | $433,782 | 8.25% | $413,616 | 8.29% | [Note 13. Other Comprehensive Income (Loss)](index=54&type=section&id=Note%2013.%20Other%20Comprehensive%20Income%20(Loss)) SmartFinancial's accumulated other comprehensive loss improved significantly to $(17.3) million at June 30, 2025, from $(23.7) million at December 31, 2024, driven by net other comprehensive income of $6.4 million Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | Beginning Balance Dec 31, 2024 (in thousands) | Net OCI (Loss) Six Months Ended Jun 30, 2025 (in thousands) | Ending Balance Jun 30, 2025 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :---------------------------------------------------- | :--------------------------------- | | Securities Available-for-Sale | $(22,350) | $5,826 | $(16,524) | | Securities Transferred to Held-to-Maturity | $(534) | $45 | $(489) | | Fair Value Municipal Security Hedges | $(166) | $(126) | $(292) | | Cash Flow Hedges | $(621) | $652 | $31 | | Total Accumulated Other Comprehensive Income (Loss) | $(23,671) | $6,397 | $(17,274) | - Net other comprehensive income (loss) for the six months ended June 30, 2025, was **$6.4 million**, a significant improvement compared to $109 thousand in the same period of 2024[13](index=13&type=chunk)[142](index=142&type=chunk) [Note 14. Segment Information](index=55&type=section&id=Note%2014.%20Segment%20Information) SmartFinancial operates as a single reportable operating segment, the General Banking Unit, with performance primarily evaluated by net income and net interest income - The Company's operations are managed and evaluated as a **single reportable operating segment**, the "General Banking Unit," which offers a broad range of financial services[143](index=143&type=chunk) - The Chief Operating Decision Maker (Executive Committee) primarily utilizes **net income** and **net interest income** to make business decisions and monitor performance[144](index=144&type=chunk)[145](index=145&type=chunk) - The most significant expenses for the General Banking Unit are deposit and other borrowing interest expense, as well as employee compensation[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of SmartFinancial's financial performance, condition, and operational results, highlighting key financial metrics, asset quality, and risk management strategies [Executive Summary](index=60&type=section&id=Executive%20Summary) SmartFinancial reported strong financial performance for Q2 and the first six months of 2025, with net income significantly increasing year-over-year, alongside improved diluted EPS and substantial loan and deposit growth Executive Summary Financial Highlights | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------------------- | :------ | :------ | :------------ | :------------ | | Net income (in millions) | $11.7 | $8.0 | $23.0 | $17.4 | | Diluted income per common share | $0.69 | $0.48 | $1.36 | $1.03 | | Return on average assets (annualized) | 0.88% | 0.66% | 0.87% | 0.72% | | Return on average shareholders' equity (annualized) | 9.19% | 6.90% | 9.18% | 7.53% | - Net organic loans and leases increased by **$215.4 million** from December 31, 2024[155](index=155&type=chunk) - Deposit growth of **$185.6 million** from December 31, 2024[155](index=155&type=chunk) [Analysis of Results of Operations](index=61&type=section&id=Analysis%20of%20Results%20of%20Operations) SmartFinancial's results of operations for Q2 and the first six months of 2025 show significant year-over-year improvements in net income, driven by increased net interest income and higher noninterest income, partially offset by rising noninterest expenses [Net Interest Income and Yield Analysis](index=61&type=section&id=Net%20Interest%20Income%20and%20Yield%20Analysis) Net interest income, on a taxable equivalent basis, increased significantly for both the second quarter and first six months of 2025 compared to 2024, primarily due to higher loan balances and increased yields on earning assets Net Interest Income and Yield Analysis (in thousands) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------------- | :------ | :------ | :------------ | :------------ | | Net interest income (in thousands) | $40,343 | $32,814 | $78,582 | $64,535 | | Tax equivalent net interest income (in thousands) | $40,693 | $33,165 | $79,272 | $64,979 | | Tax equivalent net interest margin | 3.29% | 2.97% | 3.25% | 2.91% | | Yield on earning assets | 5.65% | 5.52% | 5.61% | 5.44% | | Cost of average interest-bearing deposits | 2.95% | 3.23% | 2.93% | 3.19% | - Average loan and lease balances increased by **$546.2 million** for Q2 2025 YoY and **$515.0 million** for the first six months 2025 YoY[160](index=160&type=chunk)[165](index=165&type=chunk) - The decrease in the cost of average interest-bearing deposits was primarily due to the decrease in rates by the Federal Reserve[160](index=160&type=chunk)[165](index=165&type=chunk) [Noninterest Income](index=66&type=section&id=Noninterest%20Income) SmartFinancial's total noninterest income increased by $1.3 million in Q2 2025 and $1.5 million for the first six months of 2025, driven by growth in mortgage banking, investment services, and insurance commissions Noninterest Income (in thousands) | Category | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (QoQ, in thousands) | 6 Months 2025 (in thousands) | 6 Months 2024 (in thousands) | Change (YoY, in thousands) | | :-------------------------------------- | :--------------------- | :--------------------- | :------------------------- | :--------------------------- | :--------------------------- | :------------------------- | | Service charges on deposit accounts | $1,766 | $1,692 | $74 | $3,502 | $3,304 | $198 | | Mortgage banking | $633 | $348 | $285 | $1,126 | $628 | $498 | | Investment services | $1,440 | $1,302 | $138 | $3,209 | $2,682 | $527 | | Insurance commissions | $1,554 | $1,284 | $270 | $2,967 | $2,387 | $580 | | Other | $2,167 | $1,635 | $532 | $4,133 | $4,387 | $(254) | | Total noninterest income | $8,898 | $7,604 | $1,294 | $17,495 | $15,984 | $1,511 | - The increase in noninterest income was driven by increased volume in mortgage banking, higher investment activity, and organic growth in insurance commissions[169](index=169&type=chunk)[172](index=172&type=chunk) [Noninterest Expense](index=66&type=section&id=Noninterest%20Expense) SmartFinancial's noninterest expense increased by $3.4 million in Q2 2025 and $7.1 million for the first six months of 2025, primarily due to increased salaries and employee benefits, professional services, and other franchise growth-related expenses Noninterest Expense (in thousands) | Category | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (QoQ, in thousands) | 6 Months 2025 (in thousands) | 6 Months 2024 (in thousands) | Change (YoY, in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :------------------------- | :--------------------------- | :--------------------------- | :------------------------- | | Salaries and employee benefits | $19,602 | $17,261 | $2,341 | $38,836 | $33,900 | $4,936 | | Occupancy and equipment | $3,432 | $3,324 | $108 | $6,829 | $6,720 | $109 | | FDIC insurance | $992 | $825 | $167 | $1,952 | $1,740 | $212 | | Other real estate and loan-related expense | $757 | $538 | $219 | $1,415 | $1,123 | $292 | | Data processing and technology | $2,651 | $2,452 | $199 | $5,309 | $4,916 | $393 | | Professional services | $1,153 | $1,064 | $89 | $2,521 | $1,989 | $532 | | Other | $3,026 | $2,834 | $192 | $6,097 | $5,549 | $548 | | Total noninterest expense | $32,569 | $29,201 | $3,368 | $64,866 | $57,754 | $7,112 | - The increase in noninterest expense was primarily due to increased salaries from franchise growth, higher professional services expenses (audit fees, advisory board fees, consulting expenses), and other expenses related to overall franchise growth[171](index=171&type=chunk)[176](index=176&type=chunk) [Taxes](index=67&type=section&id=Taxes) SmartFinancial's income tax expense for Q2 2025 was $2.6 million, with an effective tax rate of 17.9%, and for the first six months was $4.9 million, with an effective tax rate of 17.5%, primarily related to the Bank's Real Estate Investment Trust Income Tax Expense and Effective Tax Rate (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | 6 Months 2025 (in thousands) | 6 Months 2024 (in thousands) | | :---------------------- | :--------------------- | :--------------------- | :--------------------------- | :--------------------------- | | Income tax expense | $2,556 | $2,331 | $4,861 | $4,962 | | Effective tax rate | 17.9% | 22.6% | 17.5% | 22.2% | - The decrease in the effective tax rate is primarily related to the Bank's Real Estate Investment Trust[173](index=173&type=chunk)[174](index=174&type=chunk) [Loan and Lease Portfolio](index=67&type=section&id=Loan%20and%20Lease%20Portfolio) SmartFinancial's total net loans and leases grew to $4.08 billion at June 30, 2025, from $3.87 billion at December 31, 2024, with real estate-secured loans as the principal component and a significant portion having floating interest rates Loan and Lease Portfolio (in thousands) | Category | June 30, 2025 (in thousands) | % of Gross Total | December 31, 2024 (in thousands) | % of Gross Total | | :------------------------------ | :--------------------------- | :--------------- | :------------------------------- | :--------------- | | Commercial real estate: Non-owner occupied | $1,114,133 | 26.9% | $1,080,404 | 27.5% | | Commercial real estate: Owner occupied | $958,989 | 23.3% | $867,678 | 22.2% | | Consumer real estate | $803,270 | 19.5% | $741,836 | 19.0% | | Construction and land development | $391,155 | 9.5% | $361,735 | 9.3% | | Commercial and industrial | $778,754 | 18.9% | $775,620 | 19.9% | | Leases | $62,495 | 1.5% | $64,878 | 1.7% | | Consumer and other | $15,266 | 0.4% | $14,189 | 0.4% | | Total loans and leases | $4,124,062 | 100.0% | $3,906,340 | 100.0% | | Less: Allowance for credit losses | $(39,776) | | $(37,423) | | | Loans and leases, net | $4,084,286 | | $3,868,917 | | Loan and Lease Maturity and Rate Distribution (in thousands) | Category | One Year or Less (in thousands) | One through Five Years (in thousands) | Five through Fifteen Years (in thousands) | Over Fifteen Years (in thousands) | Total (in thousands) | Fixed Rate (in thousands) | Floating Rate (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------------ | :---------------------------------------- | :-------------------------------- | :------------------- | :------------------------ | :------------------------- | | Commercial real estate: Non-owner occupied | $112,885 | $759,282 | $215,436 | $26,530 | $1,114,133 | $517,450 | $483,798 | | Owner occupied | $39,388 | $521,377 | $374,797 | $23,427 | $958,989 | $481,129 | $438,472 | | Consumer real estate-mortgage | $60,350 | $252,834 | $96,728 | $393,358 | $803,270 | $269,799 | $473,121 | | Construction and land development | $119,911 | $163,447 | $52,420 | $55,377 | $391,155 | $80,678 | $190,566 | | Commercial and industrial | $276,557 | $398,548 | $80,909 | $22,740 | $778,754 | $338,796 | $163,401 | | Leases | $2,841 | $59,654 | $0 | $0 | $62,495 | $59,654 | $0 | | Consumer and other | $9,902 | $5,032 | $301 | $31 | $15,266 | $4,768 | $596 | | Total loans and leases | $621,834 | $2,160,174 | $820,591 | $521,463 | $4,124,062 | $1,752,274 | $1,749,954 | [Nonaccrual, Past Due, and Restructured Loans and Leases](index=69&type=section&id=Nonaccrual%2C%20Past%20Due%2C%20and%20Restructured%20Loans%20and%20Leases) Nonperforming loans and leases as a percentage of total gross loans and leases remained stable at 0.19% at June 30, 2025, with total nonaccrual loans increasing slightly to $7.9 million, covered by a 504.20% allowance for credit losses - Nonperforming loans and leases as a percentage of total gross loans and leases was **0.19%** at June 30, 2025, a slight decrease from 0.20% at December 31, 2024[178](index=178&type=chunk) Nonaccrual Loans and Allowance Coverage (in thousands) | Category | June 30, 2025 (Amount, in thousands) | December 31, 2024 (Amount, in thousands) | | :------------------------------ | :----------------------------------- | :----------------------------------- | | Commercial real estate: Non-owner occupied | $572 | $514 | | Commercial real estate: Owner occupied | $915 | $906 | | Consumer real estate | $1,233 | $1,995 | | Construction and land development | $0 | $39 | | Commercial and industrial | $2,612 | $1,820 | | Leases | $2,556 | $2,433 | | Consumer and other | $1 | $2 | | Total Nonaccrual Loans | $7,889 | $7,709 | | Allowance for credit losses to nonaccrual loans | 504.20% | 485.45% | [Allocation of the Allowance for Credit Losses](index=70&type=section&id=Allocation%20of%20the%20Allowance%20for%20Credit%20Losses) SmartFinancial's allowance for credit losses (ACL) increased to $39.8 million at June 30, 2025, from $37.4 million at December 31, 2024, maintaining a consistent 0.96% of total loans and leases, with a provision of $2.6 million for the six months - The allowance for credit losses was **$39.8 million** at June 30, 2025, and **$37.4 million** at December 31, 2024, with the ratio of ACL to total loans and leases remaining at **0.96%** for both periods[181](index=181&type=chunk)[182](index=182&type=chunk) - The provision for credit losses for loans and leases for the six months ended June 30, 2025, was **$2.6 million**, an increase of $1.8 million compared to $818 thousand in the same period of 2024, driven by increased loan and lease volume[181](index=181&type=chunk) Allowance for Credit Losses Allocation (in thousands) | Category | Amount of Allowance Allocated (in thousands) | Total Loans (in thousands) | Ratio of Allowance to Loans in Each Category | | :------------------------------ | :----------------------------------- | :------------------------- | :------------------------------------------- | | Commercial real estate: Non-owner occupied | $7,254 | $1,114,133 | 0.65% | | Commercial real estate: Owner occupied | $8,862 | $958,989 | 0.92% | | Consumer real estate | $8,887 | $803,270 | 1.11% | | Construction and land development | $4,450 | $391,155 | 1.14% | | Commercial and industrial | $9,330 | $778,754 | 1.20% | | Leases | $868 | $62,495 | 1.39% | | Consumer and other | $125 | $15,266 | 0.82% | | Total | $39,776 | $4,124,062 | 0.96% | [Analysis of the Allowance for Credit Losses](index=72&type=section&id=Analysis%20of%20the%20Allowance%20for%20Credit%20Losses) The analysis of the allowance for credit losses shows a provision of $1.7 million for Q2 2025 and $2.6 million for the first six months of 2025, with net charge-offs of $(146) thousand and $(238) thousand, respectively, and the ACL to total loans remaining at 0.96% Allowance for Credit Losses Analysis (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------- | :---------------------------------------------- | :-------------------------------------------- | | Provision for Credit Losses | $1,747 | $2,591 | | Net (charge-offs) Recoveries | $(146) | $(238) | - The ratio of the allowance for credit losses to total loans and leases was **0.96%** at June 30, 2025, and December 31, 2024[181](index=181&type=chunk) [Securities Portfolio](index=72&type=section&id=Securities%20Portfolio) SmartFinancial's securities portfolio increased to $626.7 million at June 30, 2025, from $609.0 million at December 31, 2024, primarily due to available-for-sale securities purchases, with a slight decrease in the securities to asset ratio to 11.4% - The securities portfolio increased from **$609.0 million** at December 31, 2024, to **$626.7 million** at June 30, 2025, primarily due to available-for-sale securities purchases[184](index=184&type=chunk) - The securities to asset ratio decreased slightly from 11.5% at December 31, 2024, to **11.4%** at June 30, 2025[184](index=184&type=chunk) - The portfolio primarily consists of Federal agency bonds, mortgage-backed securities, state and municipal securities, and other debt securities[184](index=184&type=chunk) [Deposits](index=73&type=section&id=Deposits) SmartFinancial's total deposits increased by $185.6 million to $4.87 billion at June 30, 2025, driven by increases in time, money market, and interest-bearing demand deposits, partially offset by a decline in noninterest-bearing demand deposits, with the average cost of interest-bearing deposits decreasing - Total deposits increased by **$185.6 million** to **$4.87 billion** at June 30, 2025, from December 31, 2024[191](index=191&type=chunk) - This increase was driven by increases in other time deposits (**$95.2 million**), money market deposits (**$85.1 million**), interest-bearing demand deposits (**$7.1 million**), and brokered deposits (**$56.9 million**), offset by a decline in noninterest demand deposits (**$58.6 million**)[191](index=191&type=chunk) - The average cost of interest-bearing deposits decreased from 3.23% to **2.95%** for the three months ended June 30, 2025, and from 3.19% to **2.93%** for the six months ended June 30, 2025, primarily due to Federal Reserve rate decreases[190](index=190&type=chunk) - Brokered deposits represented approximately **5.52%** of total deposits at June 30, 2025[187](index=187&type=chunk) [Borrowings](index=75&type=section&id=Borrowings) SmartFinancial's total borrowings were $7.0 million at June 30, 2025, consisting of $4.0 million in short-term borrowings and $3.0 million in securities sold under repurchase agreements, with long-term subordinated debt remaining at $39.7 million - Total borrowings were **$7.0 million** at June 30, 2025, comprising **$4.0 million** in short-term borrowings and **$3.0 million** in securities sold under repurchase agreements[194](index=194&type=chunk) - Long-term debt, consisting solely of subordinated debt, totaled **$39.7 million** at June 30, 2025[194](index=194&type=chunk) [Capital Resources](index=75&type=section&id=Capital%20Resources) SmartFinancial and SmartBank maintained capital ratios exceeding regulatory minimums and "well capitalized" thresholds at June 30, 2025, with the Company believing it has various capital-raising techniques available to support its bank subsidiary if needed - At June 30, 2025, SmartFinancial's and SmartBank's capital ratios exceeded regulatory minimum capital requirements and the **"well capitalized"** regulatory classification[195](index=195&type=chunk) - The Company believes it has various capital raising techniques available to provide for the capital needs of its bank subsidiary, if necessary[195](index=195&type=chunk) [Liquidity and Off-Balance Sheet Arrangements](index=75&type=section&id=Liquidity%20and%20Off-Balance%20Sheet%20Arrangements) SmartFinancial manages liquidity through asset maturities, core deposit growth, and internally generated funding, with $957.2 million in unused lines of credit and $1.22 billion in unused borrowing capacity at June 30, 2025 - At June 30, 2025, the Company had **$957.2 million** of pre-approved but unused lines of credit and **$19.5 million** of standby letters of credit[196](index=196&type=chunk) - The Bank has unused borrowing capacity of **$1.22 billion** available with the Federal Reserve, Federal Home Loan Bank, and correspondent banks, which can be used to fund outstanding commitments[207](index=207&type=chunk) [Market Risk and Liquidity Risk Management](index=77&type=section&id=Market%20Risk%20and%20Liquidity%20Risk%20Management) SmartFinancial's ALCO oversees market risk, particularly interest rate risk, using earnings simulation and economic value of equity models to manage the impact of fluctuating market rates on net interest income and ensure sufficient liquidity [Interest Rate Sensitivity](index=77&type=section&id=Interest%20Rate%20Sensitivity) SmartFinancial measures interest rate sensitivity using an earnings simulation model, indicating that a 100 basis point instantaneous increase in rates would result in a (1.65)% change in net interest income over 12 months, while a 100 basis point decrease would result in a 1.02% increase - The Company uses an earnings simulation model as the primary quantitative tool to measure interest rate risk, quantifying the effects of various interest rate scenarios on projected net interest income over **12-24 months**[198](index=198&type=chunk)[200](index=200&type=chunk) Estimated % Change in Net Interest Income Over 12 Months | Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: | Estimated % Change in Net Interest Income Over 12 Months | | :---------------------------------------------------------------- | :------------------------------------------------------- | | 100 basis points increase | (1.65)% | | 200 basis points increase | (3.27)% | | 100 basis points decrease | 1.02% | | 200 basis points decrease | 1.91% | [Economic Value of Equity](index=79&type=section&id=Economic%20Value%20of%20Equity) SmartFinancial's economic value of equity model measures changes in asset, liability, and off-balance sheet item values due to interest rate fluctuations, indicating the company was within its policy limits at June 30, 2025 - The economic value of equity model measures the extent to which estimated economic values of assets, liabilities, and off-balance sheet items change due to interest rate changes[202](index=202&type=chunk) Estimated Instantaneous Rate Change on Economic Value of Equity | Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: | Current Estimated Instantaneous Rate Change | | :---------------------------------------------------------------- | :------------------------------------------ | | 100 basis points increase | (1.22)% | | 200 basis points increase | (3.13)% | | 100 basis points decrease | 2.76% | | 200 basis points decrease | 3.97% | - At June 30, 2025, the model results indicated that the Company was within its policy limits for economic value of equity[203](index=203&type=chunk) [Liquidity Risk Management](index=79&type=section&id=Liquidity%20Risk%20Management) SmartFinancial's liquidity risk management ensures sufficient cash flows for loan demand, deposit withdrawals, and other needs, relying on asset maturities, core deposit growth, and $1.22 billion in unused borrowing capacity - The purpose of liquidity risk management is to ensure sufficient cash flows to satisfy loan and lease demand, deposit withdrawals, and other needs[204](index=204&type=chunk) - The Company has **$4.8 million** in securities that mature throughout the next 12 months[207](index=207&type=chunk) - The Company has unused borrowing capacity of **$1.22 billion** available with the Federal Reserve, Federal Home Loan Bank, and correspondent banks[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the detailed market risk and liquidity risk management disclosures provided in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - The information regarding market risk and liquidity risk management is incorporated by reference from Item 2 of this report[209](index=209&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) SmartFinancial's management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - SmartFinancial's disclosure controls and procedures were evaluated and deemed **effective** as of June 30, 2025[210](index=210&type=chunk) - No material changes occurred in SmartFinancial's internal control over financial reporting during the quarter ended June 30, 2025[211](index=211&type=chunk) PART II – OTHER INFORMATION This section covers SmartFinancial's legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) SmartFinancial and SmartBank are routinely involved in various legal actions, but management does not anticipate a material adverse impact on the Company's financial position - SmartFinancial and SmartBank are periodically involved in legal actions in the ordinary course of business[213](index=213&type=chunk) - Management does not anticipate that the ultimate liability from pending or threatened litigation will have a **material adverse impact** on the Company's financial position[213](index=213&type=chunk) [Item 1A. Risk Factors](index=81&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive risk factors previously disclosed in SmartFinancial's Form 10-K for the year ended December 31, 2024, with no material changes during the current reporting period - The risk factors are incorporated by reference from the Company's Form 10-K for the year ended December 31, 2024[214](index=214&type=chunk) - There are **no material changes** to the previously disclosed risk factors during the period covered by this report[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) SmartFinancial has an authorized stock repurchase plan of $10.0 million, with $8.5 million utilized as of June 30, 2025, and no shares repurchased during the three months ended June 30, 2025 - The Company has an authorized stock repurchase plan of **$10.0 million**[216](index=216&type=chunk) - As of June 30, 2025, **$8.5 million** of the authorized amount has been purchased, with an additional **$1.5 million** remaining for repurchase[216](index=216&type=chunk)[218](index=218&type=chunk) - No shares were repurchased during the three months ended June 30, 2025[218](index=218&type=chunk) [Item 3. Defaults Upon Senior Securities](index=81&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) SmartFinancial reported no defaults upon senior securities during the period - There were **no defaults** upon senior securities[219](index=219&type=chunk) [Item 4. Mine Safety Disclosures](index=83&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to SmartFinancial, Inc - This item is **not applicable**[221](index=221&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) None of the Company's directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - None of the Company's directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[223](index=223&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) The exhibits include the Company's charter, bylaws, loan and security agreements, omnibus incentive plan, restricted stock award certificates, certifications, and Interactive Data Files (Inline XBRL) - The exhibits include the Company's charter, bylaws, loan and security agreements, omnibus incentive plan, restricted stock award certificates, certifications (Rule 13a-14(a)/15d-14(a) and Sarbanes-Oxley Act), and Interactive Data Files (Inline XBRL)[222](index=222&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ GSR III Acquisition Corp. (Exact name of registrant as specified in its charter) Cayman Islands 001-42399 N/A (State or other jurisdiction of incorpo ...